Ethereum just became a lot more eco-friendly. The team behind Ethereum made a change to its software architecture on Wednesday. This change is called “the Merge.”
As part of this update, Ethereum switched from the proof-of-work system to the proof-of-stake system. The proof-of-work system requires a lot of computational energy to “mine” Ethereum and has been criticized for releasing a lot of carbon dioxide because it uses so much electricity. The proof-of-stake system allows users to validate new blocks on the chain (the so-called permanent ledger) and earn new Eth tokens by using their existing Eth tokens as collateral.
Recent studies show that Proof-of-Stake is much better for the environment and will cut Ethereum’s total carbon dioxide levels by 99.99%. (The Ethereum website says that the switch uses about as much electricity as all of Finland does in a year.)
Proof-of-stake is not new, though. Ethereum’s competitors like Tezos and Solana already use it. The switch to proof-of-stake took so long because Ethereum was originally built on a proof-of-work system. Changing the architecture without any glitches was a difficult technical task that at times seemed impossible to solve. But the change, which started on Thursday, has been going very well so far.
Josh Hardy, the head of technology for the NFT platform Daata, told ARTnews, “This is one of the most important times in crypto history so far.” “There was a lot of noise made about the environment, and that has been a real problem for the whole movement. It was a perfectly valid worry, but the fact that it led to the creation of whole new blockchains is crazy.”
As the environmental debate around Ethereum heated up, the team at Daata, like many others in the NFT space, seriously thought about getting their artists’ work minted on a different chain, like Tezos, which was already proof-of-stake. But Hardy pushed for Ethereum to keep growing. He said, “I knew the Merge was coming,” which is why it didn’t make sense for Daata to switch to less valuable chains. At its peak, one Eth token was worth about $4,000, while one Tezos token was worth about $8.
Even though the environmental debate sometimes made Hardy angry, he admitted that he doesn’t think the Merge would have happened so quickly if environmental activists hadn’t made such a fuss. “I think that’s why the people at the Ethereum Foundation really pushed it,” he said.
Jon Perkins, who helped start the NFT marketplace SuperRare, has a different take on why the Merge was done. “I remember going to conferences in the very early days, and proof-of-work was always talked about as a kind of necessary evil to get Eth going,” he said. “But almost from the beginning, the developer community made it clear that the plan was to switch to proof-of-stake as soon as possible.”
It shouldn’t be ignored that the Merge comes after the 2021 bull run for NFTs and cryptocurrency in general, as well as the criticisms that came with it. No matter what, this is a big win in a hard time for those in the NFT space. After the crypto crash of 2022, the value of the crypto market dropped from $3 trillion to $1 trillion, and sales on the NFT market fell by a lot as a result.
Vitalik Buterin made Ethereum when he was still a teenager. When it came out in 2015, it had some major technical flaws that he planned to fix over time. One of the upcoming technical changes will fix another big problem: Ethereum’s ability to handle loads. When a lot of people are using Ethereum, it can be too expensive to make transactions. This is because “gas fees” go up, which can be anywhere from $10 to thousands of dollars depending on the type of transaction being made. Since the Merge went well, people are more confident that the developers can make these other changes. Building on Ethereum was seen as a bit of a risk because it wasn’t clear whether these fixes could be made.
“When we started building on Ethereum in 2017, we put a lot of faith in what the core developers of this open source ecosystem would do in the future,” said John Crain, the other cofounder of SuperRare. “The success of this gives a lot of hope for the future because it makes building on Ethereum less risky in the long run.”
Crain and Perkins hope that the Merge will make it possible for NFTs to not only get back to where they were in mid-2021, but also bring in more people than ever before.
Perkins said, “There are probably hundreds of thousands of people who have been sitting on the sidelines but now feel like they can join the crypto market in the next few months or year.”
Now that Ethereum is just as good for the environment as other proof-of-stake chains, it’s not clear if other chains can really compete with Eth without that environmental edge. But artist and environmentalist Joanie Lemercier, who has been minting his work on Tezos since the beginning, has no plans to leave the platform any time soon.
“I’m not a millionaire like a few of my friends who got rich on Ethereum and didn’t care about the environment,” Lemercier said. But he doesn’t regret his decision to mint on Tezos. He says that while his work hasn’t sold for “ridiculous” prices, sales have been steady and haven’t been nearly as affected by the crypto crash as artists who trade on Ethereum. He says that his sales have been about the same as last year and that he’s making more money than he does with his physical work, which is sold in a New York gallery.
“And the fact that the Merge didn’t really help to boost the value of Ethereum is not a good sign,” Lemercier said. “Since Ethereum doesn’t sell well, there’s no reason to switch right now. It just doesn’t sell.”
Even though good news was all over news sites and social media, the price of Ethereum barely moved. At the moment, Eth is worth about $1,400, which is more than 60% less than what it was worth at the same time last year. But it’s still early.